12 October 2012 6:52 PM

During Thursday’s vice presidential debate Vice President Biden denied any cronyism in the awarding of Energy Department grants. He said to Paul Ryan, the Republican vice presidential candidate, 'and all this talk about cronyism. They investigated and investigated, did not find one single piece of evidence. I wish he would just tell - be a little more candid.'

It’s Vice President Biden who should be more candid. Email exchanges published by congressional committees show cronyism’s influence in Energy Department awards.

For instance, emails from March 2011 show substantial White House involvement in directing Department of Energy subsidized loans to BrightSource Energy, a company that received a $1.6 billion loan from the government to build the world’s largest solar power plant in the Mojave Desert.

Jonathan Silver, then-executive director of the Energy Department’s loan guarantee program, helped draft a letter from John Bryson, then-chair of BrightSource Energy, to then-White House chief of staff William Daley requesting help in obtaining the loan. These emails were written from Silver’s personal account during business hours and provided advice to BrightSolar on March 7 and 8, 2011.

It would have been improper for a government official to have assisted an applicant for a government loan program using a government computer on government time. But it’s impossible to believe that using a nongovernmental account makes the action appropriate. Indeed, it appears to be an effort to conceal an unseemly activity.

In an additional crony twist, in October 2011 Bryson became President Obama’s Secretary of Commerce.

Then, take Solyndra, the California solar panel company which received $528 million in energy loan guarantees from the Energy Department in 2009 before going bankrupt in August 2011.

Why did the Department pour more funds into Solyndra and accept a subordinate status on the loan? Because one of President Obama’s campaign contributors, George Kaiser, was a major investor through Argonaut Private Equity. Kaiser raised between $50,000 and $100,000 in donations for the president, and donated over $50,000 to Democratic political action committees.

White House visitor logs for 2009 show that George Kaiser made several visits to key White House staffers before the loan guarantee for Solyndra was approved. From 2009 to 2011, he made seventeen visits to the White House.

On August 2, 2012, the House Energy and Commerce Committee concluded in a report entitled 'The Solyndra Failure' that 'George Kaiser, whose fortune funds the George Kaiser Family Foundation, was closely involved in financial decisions relating to Solyndra, often authorizing key disbursements and restructuring proposals, as well as in Solyndra’s lobbying, public relations, and government procurement strategies in Washington.'

Ken Levit, executive director of the George Kaiser Family Foundation, and Tony Knowles, president of the National Energy Policy Institute (co-founded by Kaiser), came along on several of these White House visits. Mr. Levit wrote to Steve Mitchell, a Solyndra board member, on February 27, 2010, 'They about had an orgasm in Biden’s office when we mentioned Solyndra.'

On October 6, Mitchell wrote to Kaiser, 'In addition, the consensus is that a meeting with the new White House Chief of Staff is the best avenue to approach the administration for support on the DOE front and for assistance in securing any type of procurement commitments from the government and the military.'

And as Soyndra was facing increasing difficulties, Steve Mitchell detailed more cronyism in an e-mail to George Kaiser. He wanted the Department of Defense to buy Solyndra’s solar panels over the next three years outside the usual procurement process. Mitchell wrote, 'We are also planning to ask the DOD to execute a purchase order to buy our panels—DOD has 3X the rooftops of Wal-Mart and is the biggest consumer of electricity in the US (and wants to buy solar panels)…. the DOD has the capacity to easily sign a 300MW three-year purchase order for our panels…'

Biden said on Thursday night, referring to green jobs, 'It was a good idea, Moody's and others said that this was exactly what we needed to stop this from going off the cliff. It set the conditions to be able to grow again. We have, in fact, 4 percent of those green jobs didn't go under - went under, didn't work. It's a better batting average than investment bankers have. They have about a 40 percent...'

But this is false. Government-supported energy companies have had a notoriously unsuccessful track record. Of the 33 energy loan guarantees made under the Energy Department’s programs, 26, or almost 80 percent, have shown signs of trouble. 'Trouble' ranges from missed production goals to bankruptcy filings. Compact Power, a battery company, just announced plans to furlough much of its workforce.

A report by the House Government Reform and Oversight Committee published in March reported that 23 loans were judged by ratings agencies as 'junk' because of their low credit quality. An additional four were rated BBB, a low investment trade.

As much as Biden tries to defend his administration’s green jobs program, the facts speak for themselves.

Diana Furchtgott-Roth, senior fellow at the Manhattan Institute, is the author of Regulating to Disaster: How Green Jobs Policies Are Damaging America’s Economy, just out from Encounter Books.

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03 October 2012 8:00 PM

Governments
around the world are telling the public that 'green energy' - an expansive term
that embraces renewable energy, pollution reduction, and conservation - will
create jobs, lots of jobs, and that the government must subsidise green energy
to create these jobs.

Although
economies are slowing and unemployment rising, and electricity from wind and
solar costs more than electricity from other sources, the focus on green jobs
persists. But no one knows what green jobs are.

Governments
cannot agree on the function or characteristics of a green job, although so
many people seem to want them. Some green jobs, such as home insulators, have
been around for decades and are being relabeled as green jobs. Other jobs, such
as manufacturing electric vehicles, are green jobs, but come at the expense of
ending other auto industry jobs.

No
wonder, then, that countries have not succeeded in creating many green jobs. Meanwhile,
the cost to the taxpayer rises.

Green jobs are part
of a new social ethic of employment. A job is good; a green job is better. A
green job gives us virtue, a dispensation for the other shortcomings of our
life. This Theology of Green Job virtue can be found in practically every
country around the world.

We may have moral
shortcomings; we may earn little; our lives and the society around us may be
disintegrating. But if we have a green job, we have a virtue beyond reproach.

In school, children
are taught to aspire to green jobs and to eschew opportunities that lack green
virtue. The world, so they are taught, is about to end, and only a brave new
world order of obedient green job holders can save it. Never mind the economic
malaise and social decay that permeate our lives. Green jobs can save us.

Our children may
grow up economically insecure, but they are psychologically secure in knowing
that their economic sacrifices are saving the world. They consider themselves morally
superior to their parents, who grew up in a generation that never knew green
jobs.

Green jobs are not
only more virtuous than other jobs. As it turns out, green jobs sometimes are
eligible for government subsidies; call it a political advantage over other
jobs. Yet green jobs often are not economically viable. Stated differently,
green jobs may be morally superior, but they are economic disasters, a waste of
taxpayer resources, and a drain on governments’ budgets.

In Britain,
a 2010 parliamentary report entitled 'Green Jobs and Skills: Government
Response to the Committee’s Second Report,' stated that 'The transition to a
low carbon economy will require a ‘greening’ of the whole of the economy. As
such, all jobs will need to be ‘greened’ to some extent.'

However, in a flash of wisdom unseen
elsewhere, another parliamentary report warned about the possibility of
displacing other workers through green employment initiatives, saying 'jobs
will have to move from carbon-dependent sectors to low carbon sectors as
economic growth shifts.'

In America, the Department
of Labor has counted 3.1 million green jobs, defined either as 'jobs in businesses
that produce goods or provide services that benefit the environment or conserve
natural resources,' or as 'jobs in which workers’ duties involve making their
establishment’s production processes more environmentally friendly or use fewer
natural resources.'

The Department has
compiled a list of 333 detailed industry groups that can be classified as
green. Many jobs in those industries qualify as green jobs, and those who are
employed in those industries can be counted as 'green workers.'

In Australia
and New Zealand, green jobs are define as 'managers, professionals and
technicians who work in green organisations or who have green skills and
responsibilities within other organisations that may not be considered as
green; [or] service, clerical, sales and semi-skilled workers who work in green
organisations.'

In Japan, the prime
minister ordered the environmental minister to draft a Green New Deal in 2009
including funds for green jobs creation. Also, Japan’s National Parks Program has
a green worker program that has created green jobs. It gives as examples of
operations undertaken the elimination of alien species; repairs of mountain
trails eroded by rainwater and overuse; and burning off fields for the
maintenance of grassland landscapes.

International
organisations have their own sets of definitions. In a joint study, the
International Labour Organisation (ILO) and the United Nations Environment
Programme (UNEP) define green jobs 'as work in agriculture, industry, services
and administration that contributes to preserving or restoring the quality of
the environment.'

A 2010
Report by the Organisation for Economic Cooperation and Development (OECD) states
that 'green jobs are defined as jobs that contribute to protecting the
environment and reducing the harmful effects human activity has on it
(mitigation), or to helping to better cope with current climate change
conditions (adaptation).' Eurostat, the statistical arm
of the European Commission, uses the OECD’s definition.

The push for green
jobs is not effective in combating global warming if China
and India
do not follow along—which they show no sign of doing. China and India are both rapidly developing
countries, and combined they make up nearly 37 per cent of the world’s total
population. China
produces 70 per cent of its electricity from coal, and less than 2 per cent from
renewables.

The Chinese
government understands that using renewable energy is not cost-effective, and
its main objective is to take advantage of both its low-cost labor and the Western
obsession with environmentalism to become the world’s leading producer of
renewables.

In other words, China is intent on strengthening
its economy rather than fighting the possibility of manmade global warming. Likewise,
in India,
renewables such as geothermal, solar, and wind power hold little importance
in its electric power generation.

In
supporting green policies, we are consenting to live in a poorer world with slower
economic growth—for little gain. It’s time to rethink green jobs policies.

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30 August 2012 10:47 AM

Will Paul Ryan, the
Republican vice presidential candidate, carry his team to victory in
November? Judging from his Wednesday address
to the Republican convention in Florida,
the answer is yes.

Ryan’s
attack on President Obama and his defense of Republican principles and the
presidential candidate, Mitt Romney, has the Democrats wishing that Hurricane
Isaac had hit Tampa instead of New Orleans.

Looking
young and vigorous, with a well-fitting suit, he declared, “I’ve never seen
opponents so silent about their record, so desperate to keep power.” Obama got all the stimulus he wanted, Ryan
continued, but the money was borrowed, spent, and wasted. Taxpayers just got more debt.

Ryan,
speaking in Florida,
a state with a larger concentration of older Americans, made a strong defense
of his Medicare plan, the program which provides health services for seniors,
as they are known here.

Although
his plan has been demonized by Democrats as a voucher program, Ryan pointed out
that Obama took $716 billion from Medicare to fund the new health care law, the
Patient Protection and Affordable Care Act.
The Act, through its pruning of Medicare receipts, is the biggest threat
to Medicare.

It’s
lucky than Ryan wants to bring up Medicare, because the debate is in full
swing.

Just
Saturday, in his weekly radio address, Obama said of Republicans: “They
want to turn Medicare into a voucher program. That means that instead of being
guaranteed Medicare, seniors would get a voucher to buy insurance, but it
wouldn’t keep up with costs.”

Obama
is wrong. “Voucher” does not appear in
the Republican plan. The new plan would only apply to future seniors beginning
in 2023. And they would continue to have
a choice of traditional Medicare, as well as other plans, too.

Everyone
here agrees that Medicare is in trouble.
The Congressional Budget Office’s new estimates, released last week,
raised projected Medicare spending by $136 billion over the next decade. Since
Medicare was established more than 40 years ago, projections have gone in one
direction: up.

Yet
Ryan’s plan to reform Medicare, adopted by the House Republicans last spring,
is routinely vilified. The budget resolution and Medicare proposals are on the
Web site of the House Budget Committee. They can be found here.

Voucher
programs give beneficiaries a set amount of money to use for a particular
purpose—education, groceries, insurance—and to spend for any permitted school,
plan, or product they prefer.

Ryan’s
new plan is known as “premium support.” Modeled after the popular Federal
Employees Health Benefits Program, Ryan would let seniors who retire in 2023
and later choose from a variety of government-approved, competing and
comprehensive health insurance plans, at different prices with different levels
of service, including traditional fee-for-service Medicare.

Unlike
food stamps, where recipients go to any store, seniors could only pick a
pre-approved plan.

The
distinction between vouchers and premium support matters because premium
support offers more protection for the consumer.

With
a voucher, consumers can purchase any health insurance plan. Some critics—I am not among them—are
concerned that seniors won’t choose the right plan or insurance companies will
take advantage of seniors. With premium support, the government has
pre-approved the permitted plans.

The
amount of funding, or premium support, would be determined by the second
least-expensive approved plan, or traditional Medicare, whichever is less
costly.

The
advantage of premium support plans such as the Federal Employees Health
Benefits Program is the variety of plans at different prices.

With
more choice, plans have to compete for customers, and this translates into
lower costs than would be the case otherwise.
Competition is fierce among government plans during enrollment season
for federal health plans. Washington
D.C.’s citizens are deluged with
radio, TV, and bus advertising with pictures of beautiful people promoting
different plans.

Ryan
realizes that alternatives are needed for bankrupt programs, and he’s willing
to have a real debate. As he said, the
simple reality is that Americans need to stop spending money we don’t have. Win
or lose in November, just as Europe needs
reform of its health and pension programs, we cannot shy away from
Medicare.

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14 August 2012 4:58 PM

In an election cycle that has focused on such pressing issues as Mitt Romney’s taxes, Bain Capital’s decisions after Romney’s tenure, and the well-being of the Romney family’s horse and dog, let us hope that the selection of Paul Ryan as Romney’s running mate starts a new discussion on the future of America.

Mitt Romney’s first major executive decision was to nominate budget-wonk Paul Ryan as vice-presidential candidate. For that, Romney is to be applauded, because it shows he appreciates the seriousness of America’s economic problems—a GDP growth rate stalled at 1.5 per cent, and an unemployment rate that has been above 8 per cent since February 2009.

It’s not just that Ryan has a complete mastery of the budget numbers, from his tenure as a staffer to Jack Kemp and Sam Brownback. Generally in America politicians leave legislative details to their staff, and focus on the important part of governing—telephoning donors to ask for dollars and making speeches of the floor of the House and Senate. But Ryan was a staffer in charge of the numbers, so he has the skills and confidence to present a convincing argument for reducing the path of government spending and cutting taxes. It’s no accident that he was the lone Republican who took on President Obama at a bipartisan meeting on health care proposals in February, 2010.

By choosing Ryan, Romney may appeal to middle-class voters who will be crucial for success in vital battleground states such as Ohio and Virginia. Ryan in many ways complements Romney and completes the Republican ticket.

Romney’s father was a multi-millionaire CEO, governor, and presidential candidate. Ryan’s father died when he was a teenager. Romney’s private sector experience involves running a private equity firm. Ryan drove a Wienermobile, a vehicle shaped like a hot dog, in order to make money as a teenager after his father’s untimely death.

Ryan depletes the liberal argument that the GOP is the enemy of the middle class and that upward mobility is a fantasy. He rose from modest roots in Janesville, Wisconsin, to become the vice-presidential nominee of a major political party. He lives a stone’s throw from the house where he grew up. He sleeps in his congressional office during the week (rather than buying a second home in Washington) and flies home to his family on weekends. This is what America has always been about.

Ryan’s meteoric rise has not been the result of his grasp of the political machine, but rather of his ideas. In 2008, Ryan unveiled the Roadmap for America’s Future, a plan to emerge from the country’s overwhelming debt. Instead of spouting out vague ideas on lower taxes and entitlement reform, Ryan proposed an in-depth, detailed proposal on how exactly to clean up America’s fiscal mess.

Fast forward to 2011, when the Republicans won a historic majority in the House of Representatives and Paul Ryan became chairman of the House Budget Committee. The Roadmap grew into the Path for Prosperity, adopted by the House of Representatives as its budget plan in March.

Not surprisingly, Democrats have greeted his boldness with derision and mischaracterization, suggesting that Ryan would rather that the elderly and the ill just died in order to cut costs. One TV advertisement featured a Paul Ryan look-alike pushing an elderly woman in a wheelchair off a cliff.

Contrary to popular belief, under the Ryan budget government spending would continue to rise, from $3.5 trillion in 2013 to $4.9 trillion in 2022. But the rate of increase would slow from current projections and from President Obama’s budget.

In other words, both the Obama and Ryan budgets would raise spending. But Ryan’s budget would have smaller increases than Obama’s budget.

The Ryan budget does not cut Medicare in absolute terms. Medicare spending under the Ryan budget would grow from $503 billion in 2013 to $855 billion in 2022. And, through 2050, the Ryan budget assumes 2 percent real growth per year, from $5,000 per beneficiary now to $11,000 per beneficiary in 2050 in inflation-adjusted dollars.

Ryan would let those who are 55 and younger in 2013 have an option to keep traditional Medicare or choose another government-approved plan when they retire. That would make traditional Medicare compete with private insurers. Ryan would increase the support that is now offered to lowest income seniors.

Spending on Medicaid and other health programs for low-income individuals would grow from $307 billion in 2013 to $402 billion in 2022. This is not a cut, except from a planned spending path that is much higher.

Spending on Social Security would rise from $813 billion in 2013 to $1.3 trillion ten years later.

Ryan proposed to simplify and lower tax rates for individuals and corporations, attracting companies back to America and increasing incentives to work and invest. His plan has two individual income tax rates, 10 per cent and 25 per cent. The corporate rate would go from 35 per cent to 25 per cent. The plan focuses on larger themes of reducing taxes, leaving details to the House Committee on Ways and Means, the committee charged with crafting tax bills.

The larger truth is that the Ryan approach—including across-the-board tax rate reductions—would reinvigorate the economy, foster job creation, restore optimism, and put America back on the right track.

Republicans have given the Path to Prosperity a full-hearted endorsement by voting it out as the House of Representatives budget. (The Democratic Senate has not passed a budget for three years.) Presidential candidates such as Senator Rick Santorum copied his budget proposals. The Ryan plan sets the standard for all Republican plans because Paul Ryan is the intellectual leader of the Republican party.

Ryan has been easily re-elected with more than 60 per cent of the votes in one of the most politically balanced districts in the country, which went for Obama in 2008. Ryan has a proven record of attracting independents and moderates. He says his constituents appreciate the truth, and he does not talk down to them.

From now on, the campaign will not only be a referendum on Obama, but a stark choice between two radically different types of governing: one that emphasizes collectivism through high taxes and dependence on society, and another that stresses economic growth through free markets and self-sufficiency.

The ever-cautious Romney has made a bold move. Historically, the choice of vice presidential candidate has not altered the results of the election—but this time may be different.

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28 June 2012 7:51 PM

The Supreme Court has finally issued its ruling on the Patient Protection and Affordable Care Act. The Court ruled that it is illegal for the government to require people to purchase health insurance, but the government may tax people if they do not purchase the product.

As Chief Justice Roberts wrote, 'the individual mandate must be construed as imposing a tax on those who do not have health insurance'.

The Court also ruled that the government cannot take away states’ Medicaid funds—funds for providing low-income Americans with health care—if the states do not set up mandated Medicaid programs.

Although the Court has upheld PPACA, the law as currently structured is unworkable. This is because the penalty for not signing up for insurance, which is now termed a tax, $750 a year, is too small relative to the cost of health care coverage, about $5,500 a year.

Since insurance companies are required to take all applicants, healthy people, especially the young, will pay the tax rather than buy the insurance. This makes the pool of insured individuals sicker and more costly, on average, and their premiums will be higher. With higher premiums, more people will choose to pay the tax, and a downward spiral will unfold.

Unless Congress raises the tax to the level of premiums, the system will have to be replaced with a public option.[related]

This is a poignant victory for President Obama. When he argued for the passage of PPACA, he stated that the penalties were not taxes. He assured Americans that he had not raised their taxes. But now, with the Supreme Court ruling, he is responsible for one of the largest tax increases in American history.

This is a warning to American presidents that they do not know who they will get when they appoint Supreme Court justices. It was Chief Justice Roberts, an appointee of President George W. Bush, who sided with the liberals and called PPACA constitutional when interpreted as a tax.

Paradoxically, the Supreme Court victory helps Governor Mitt Romney, the presumptive Republican presidential nominee. The law is tremendously unpopular, so his position that he will repeal the law will resonate among many. If the Court had tossed out the law, his platform of repeal would have disappeared.

Where to from here? It is clear that PPACA has severe economic costs, and is at least partially responsible for the slow economic recovery, and needs to be replaced.

PPACA raises employment costs by requiring employers to offer qualifying insurance coverage or pay a penalty—now a tax. Because this requirement will apply, starting in 2014, to firms with more than 49 full time employees, it will discourage the hiring of full-time workers, especially low-wage hands whose work can more easily be divided among part-timers. Firms with over 49 workers will have to pay $2,000 a year for each employee without qualifying coverage. Expanding to 50 workers would, in 2014, cost a firm $40,000 a year (the first 30 workers are exempt).

PPACA encourages employers to substitute part-time for full-time workers to avoid the tax. A firm with 60 employees would pay a tax of $60,000 a year if it did not have qualifying health coverage. But if it put 11 workers on part-time, and hired another 11 part-timers, it would not owe a tax, because it would have 49 full-timers. The full-timers who become part-timers and lose salary and benefits would be worse off.

PPACA raises health insurance costs by requiring an overly-generous plan. In order to be counted as a 'qualified benefit plan' and be able to sell health insurance in the exchange, an underwriter must cover routine health care—such as check-ups, and contraceptives—without copayment. It must also cover maternity care, mental health and substance abuse.

Unfortunately, plans that encourage shopping around, such as catastrophic plans with large deductibles combined with health savings accounts, where people can save tax-free for medical care, are prohibited by PPACA for Americans ages 30 and above.

A health insurance system needs to be accessible, portable, and inexpensive, just like other forms of insurance.

There’s no theoretical reason that a Republican Congress and a Republican president cannot pass a better law in 2013. The economy provides a wide range of insurance products—home insurance, auto insurance, life insurance, renters’ insurance—that Americans choose to buy without mandates. Why? Because they’re a good deal. Americans want them. Health insurance should be the same way.

Life insurance and renters’ insurance are not required. Many Americans go beyond the required minimum auto and home insurance because these policies have value.

America knows how to help people with low incomes. Those who can’t afford housing get housing vouchers. Those who can’t afford food participate in the Supplemental Nutrition Assistance Program, formerly food stamps. Public housing has been a failure, and Americans don’t deliver baskets of groceries to the doors of low-income Americans, they give them a debit card to purchase food. SNAP has been subject to abuse, but no one is proposing to replace it with one-size-fits-all bags of groceries.

The same should be true of health insurance. Those who can’t afford it should be offered refundable tax credits, or vouchers, to purchase it themselves, so they can have the same choice of doctors and services as other Americans.

Just as in other forms of insurance, America can lower costs by reducing unnecessary regulation, increasing competition and patient choice. Patients should decide what type of coverage meets their needs, not be told what they must purchase by the federal government.

For example, if some people want their children to be on their insurance plan until age 26, or age 28, or age 30, they should be able to purchase plans that cover their children, at a price. Others who do not have children, or who do not want their children on their plans, should not have to pay the costs.

How would such a system operate?

Congress could give all Americans tax credits for buying health insurance; allow plans to compete over state lines; and set up state risk pools to insure those with uninsurable conditions.

America knows how to provide insurance. America knows how to provide benefits for low-income Americans. America just needs to apply this know-how to health insurance. Regardless of the Supreme Court’s verdict, Congress and a new president can succeed.

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03 May 2012 12:42 PM

One of the most interesting races in America will take place on May 8 in the Indiana Republican primary. David McIntosh, who served in the U.S. House of Representatives from 1995 through 2001, is running for an open seat in the Fifth District.

Since the District is Republican, the winner of the primary is almost certain to win the seat in November.

Back in 1991, I worked with David McIntosh at the White House. He stood up for ordinary Americans in a city where ordinary Americans had little support.

I was working for President George H. W. Bush on the Domestic Policy Council and David was leading Vice President Dan Quayle's Competitiveness Council. We fought together for key issues such as regulatory reform and reducing the burden of government.

As our economy sputters, these issues are as vital today as they were 20 years ago.

Then, the American economy was suffering. Businesses across America and in Indiana were shutting down. Those staying in business were not hiring. The economy wallowed in recession.

The vast majority in Congress had a simple prescription: tax more, spend more, regulate more, and make more decisions in Washington. Like 17th century quacks carrying jars of leaches to suck the blood from an injured patient, the congressional majority marched ahead with its wrong-headed medicine, oblivious to the harm it caused. Powerful interests supported the Congressional majority.

A bad economy and bad economic policy hurts ordinary Americans the most. The salesman, the teacher, the truck driver, the store clerk, the receptionist, the factory worker: these are the hard-working ordinary Americans who are harmed by bad policies in Washington.

A few voices stood up to the congressional majority. Most were well-known, powerful voices. But in all of Washington, no voice rang more clearly and more consistently than that of the young man from Indiana, David McIntosh.

When anyone asked him how he knew the Congressional prescription of more taxes, more spending, and more regulation was wrong, David McIntosh had a simple answer: common sense.

The powerful interests in Washington scoffed at him and his Competitiveness Council. They said he was too young and inexperienced and powerless to stop the congressional majority intent on more taxes, more spending, more regulation, and more power in Washington.

But a miraculous event happened. David McIntosh and his Competitiveness Council succeeded beyond all expectations. As the result of his efforts, job-destroying environmental regulations were delayed. Other job-destroying regulations never happened. The congressional majority and their powerful backers were stunned.

When Mr. McIntosh ran for Congress from Indiana in 1994, you can be sure that the powerful interests that supported the Congressional majority were dead set against him. But when he was elected, the new Republican majority created a subcommittee on regulatory oversight just so that David McIntosh could have the rare distinction of being a freshman with a chairmanship. Imagine that: a freshman congressman from Indiana chairing a committee to reduce federal regulation.

But keeping a lid on overregulation was not all that David did. He put his sharp mind to work solving some of our nation's most difficult problems, such as our ballooning deficit and our broken welfare system. With David’s support, the federal budget deficit shrank from a deficit of $164 billion when he entered Congress in 1995 to a surplus of $128 billion when he left in 2001.

If there were a movie made about Mr. McIntosh’s times in Congress, Jimmy Stewart, if he were alive, should be the lead. No one could infuriate and confound the Washington establishment more.

Now Mr. McIntosh is running for Congress again. I know this: entrenched interests in Washington still want to tax more, to spend more, to regulate more, and to make more decisions in Washington. Those interests do not want David McIntosh and his values in Congress again. Soon, we will find out what the good folks of Indiana have to say about that.

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27 April 2012 10:41 AM

How can President Obama’s estimate of his fiscal 2013 budget proposals diverge so radically from the estimates provided by the nonpartisan Congressional Budget Office? This year, estimates for the same proposals are far apart--$7.6 trillion, to be precise.

The White House calculates that President Obama’s fiscal 2013 budget would reduce the deficit by $4 trillion, and the Congressional Budget Office estimates that the same budget would increase the deficit by $3.6 trillion.

CBO’s projections raise the deficit, in contrast to the White House’s claim that Obama’s proposals would lower it.

In his February budget, the president wrote, “Together with the deficit reduction I signed into law this past year, this Budget will cut the deficit by over $4 trillion in the next decade.”

The divergence in the revenue estimates reemerged last week when the Congressional Budget Office released a report entitled “The Economic Impact of the President’s 2013 Budget.” You can read it here.

Why such different outcomes from CBO and Obama’s budget office?

The explanation lies in the assumptions behind the U.S. budget that would happen in the absence of any policy change, know as the “baseline budget.” CBO assumes that the Bush tax cuts will expire at the end of 2012, as scheduled. Government revenues would rise and the 10-year deficit would be $2.9 trillion.

The White House assumes that some time this year Congress will extend the Bush tax cuts and other assorted budgetary items, as it did late in 2010, resulting in a 10-year federal budget deficit of $8.7 trillion.

Since Obama’s budget assumes that the Bush tax cuts will not expire, proposing that some of them expire enables the president to count this as deficit reduction and reduce the deficit to $6.7 trillion. Just one example: allowing the Bush tax cuts to expire for couples making over $250,000 annually ($200,000 for singles) nets $20 trillion over ten years, the largest component of the $40 trillion in tax increases.

And, it may be noted, the White House fails to anticipate any adverse economic consequences from these tax increases. That is unrealistic.

The White House’s published budget numbers are not only inconsistent with current law, they are also inconsistent with his statements. Obama assumes in his “baseline budget” that taxes will not rise on the wealthiest Americans, which they are scheduled to do under current law. Then, he proposes to raise them, to reduce the deficit. What audacity.

As CBO’s economists recognize in their new report, if the Bush tax cuts do expire in December, economic growth will slow and revenues will be lower.

Due to slower economic growth, CBO estimates that government's 10-year revenues under the president’s budget would be $30 trillion, compared to the White House figures of $40 trillion.

CBO's shows how the Obama budget, if adopted by Congress, would affect private-sector economic decision-making, such as individuals’ decisions to work and invest, and companies’ decisions as to how to expand.

CBO’s findings:

If present policies were unchanged, the budget deficit would be $2.9 trillion over the next decade.

Under the president’s policies, without macroeconomic effects, the deficit would increase to $6.4 trillion over the next decade, or $3.5 trillion more than the baseline.

Such effects include a shrinkage of the capital stock due to higher taxes on capital gains and dividends, higher interest rates and higher ratios of debt to GDP due to increased government spending and borrowing, and a smaller labor supply due to higher welfare payments and a lower wages from reduced productivity.

Whatever the assumptions and outcomes, it is plain that the government is running, and is likely to incur, deficits that are too big for healthy economic growth.

Possibilities for spending cuts include reforming Medicare and Social Security, especially in light of the new warnings from the Medicare and Social Security Trustees that the trust funds would be exhausted sooner than previously thought.

Spending could also be trimmed from large projects such as high-speed rail, energy loan guarantees, and subsidies for electric cars.

If Obama is reelected, then the deficit will expand, in all likelihood. The sad truth is that presidential budgets are even more unrealistic than ever, and in Washington are no longer taken seriously.

Although the Republican-controlled House of Representatives has put forward a budget cutting spending substantially, the Democratic Senate has not adopted a budget resolution for three years, and is only now moving towards constructing one for fiscal 2013.

America, with four years of deficits exceeding $1 trillion, is, to use the old expression, fiddling while Rome burns. And the arithmetical obfuscation serves to hide this reality from voters, who, on Election Day, will have a say about the direction of the budget and our economy.

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20 April 2012 10:57 AM

The U.S. government borrows four dollars out of every 10 dollars that it spends. One day the funds will have to be repaid, and young people are starting to take note of their future tax bills.

Last week Kyle Smith, a 25-year old post-graduate engineering student from the University of Texas, decided to fight back. He wanted to tell his contemporaries how much the government’s spending spree would cost if the government were to live within its means, just as do households and states.

So he launched Debt Bomb, a new 99-cent app for the iPhone, iPod Touch, or iPad—also at www.debtbombapp.com. Debt Bomb tells you how much tax you would have to pay to cover all government spending for the year.

With Kyle’s app, you can key in your age, state of residence, income, and future expected income, and the app gives you your household’s average tax bill to cover the government’s annual spending.

Alternatively, the app can calculate taxes based on a target of holding the U.S. budget deficit to no more than 2 percent of GDP.

Then, through the app, you can email or tweet President Obama and your congressional representatives and tell them to cut spending, raise taxes, or some combination. To show them you are serious, you could tell them which programs to cut, whether agriculture, unemployment benefits, mass transit, energy loan guarantees, or others.

Perhaps if Debt Bomb had been available twenty years ago for Greeks, Greece would not now be facing default.

Kyle belongs to Generation O, the generation of young people who contributed, registered, volunteered and voted for Barack Obama with greater intensity than we have seen since at least the 1960 election of John F. Kennedy.

Ironically, the effect of Obama's failed economic policies has fallen most heavily on the young. Their unemployment rates and student loan debt loads have risen in tandem—along with federal debt, and the taxes that will be required to foot the bill for the failed stimulus programs and boondoggles such as high speed rail and government-funded electric cars.

Take two 25-year olds, a married couple earning $30,000 a year each in Massachusetts with no children. Their average taxes in 2011 would have been about $13,700. If the budget were balanced through tax increases, they would owe $18,900, or 38 percent more. If the deficit were on a sustainable 2 percent path, their average taxes would rise by $4,000, or 29 percent.

It’s understandable that young people are concerned about their future tax burden. Their economic prospects are stark as the U.S. economy appears stalled in a rut of 2 percent annual growth, well below the 1947 to 2007 trend line of 3.4 percent a year.

The American unemployment rate in 2011 for newly graduated men and women ages 20-24 with BAs was 9 percent, almost twice the 5 percent rate these young adults experienced in 2006, as the recession has discouraged hiring.

These unemployment rates among Generation O not only suggest personal disappointment, but also large and lasting implications for them and for society. Graduating in a recession leads to earnings losses that last for 10 years. Earnings losses are greater for new entrants to the labor force than for those existing workers who keep their jobs.

That may explain why Generation O has a fear of downward mobility, that they will not do as well as their parents.

As if lack of jobs isn't bad enough, large increases in college costs in recent years mean that Generation O is starting the career ladder with substantial debt. American students who graduated in 2011 left school with almost $23,000, on average, of student loans, the most ever, according to Howard Dvorkin, founder of Consolidated Credit Counseling in Fort Lauderdale. For graduates of some private colleges, law schools, and medical schools, debt to be repaid was even higher.

America has seen four years of deficits exceeding $1 trillion, with little end in sight. For only 99 cents, Kyle Smith’s Debt Bomb shows how his Generation O will bear the brunt of this spending spree.

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12 April 2012 7:12 PM

As America’s Tax Day approaches on April 16, President Obama is traveling the country promoting his Buffett Rule, a 30 percent tax on millionaires. Yet, according to the Joint Tax Committee, this will raise only $47 billion over the next decade, a fraction of America’s $ 6.7 trillion 10-year deficit. Plus, billionaire Warren Buffet, chairman and CEO of Berkshire Hathaway, after whom the rule is named, will still live tax-free.

In contrast, the Bush Institute has launched its 4% Growth Project to investigate ways to double economic growth from its recent rate of 2% to 4% through tax reform. That would reduce the deficit by increasing tax receipts from productive businesses and better-off individuals.

Named for former President George W. Bush, the Institute has tapped Amity Shlaes, a prominent conservative intellectual, to be director of the project.

Never mind that passage of the “Buffett Rule” will not change Buffett’s tax rate. Berkshire Hathaway, is set up as an insurance company, using insurance company reserve rules. So assets in Berkshire Hathaway grow free of tax.

Here’s how Buffett legally gets a zero rate of tax, according to Larry Lindsey, former top economic adviser to President George W. Bush. Buffett gets his earnings from selling shares in Berkshire Hathaway. Then, he generously gives away other shares to charity. He pays no tax on these shares’ capital gains, and legally writes off these charitable contributions against his income. Since he gives away approximately as many shares as he pays himself, he pays no tax.

The Buffett Rule would affect only 2% of the 400,000 Americans making more than a million. That’s why it raises only $47 billion over the next decade.

What’s the alternative to such gimmicks? Economic growth that raises revenue not through higher tax rates, but through the same rate of tax on additional earnings of individuals and corporations.

Some might call 4% growth rate ambitious. But that just shows how expectations have diminished. In the 1950s and 1960s, no one would have thought that 4% was a worthy target.

Economic evidence from Nobel prizewinning economist Edward Prescott and others has shown that higher tax rates discourage work, and states with lower taxes have higher growth rates. Globally, smaller governments exhibit higher growth rates. As director of the 4% Growth Project, Ms. Shlaes’s mission is to marshal the evidence, present it to the public, and collect data to make cross-country comparisons.

The conference message is that tax competition is beneficial, and, when it comes to taxes, less is more. The program featured a line-up of prominent Republicans, including the 43rd president, five state governors, and the GOP’s present fiscal leader, House Budget Committee Paul Ryan of Wisconsin, who campaigned in his home state with Governor Romney last month.

A speaker from north of the border, James Flaherty, Minister of Finance in Canada’s conservative party government, recounted how he and Prime Minister Stephen Harper had cut taxes, increased foreign investment, and made more effective use of Canada’s huge trove of natural resources, including tar sands oil. Now, Canada’s unemployment rate is one percentage point lower than America’s at 7.3%. It used to be higher.

Rather than phony Buffett rules, Lindsey sees America as eventually replacing both the corporate and individual income taxes with a value-added tax, a national sales tax, as is common in most industrialized countries. Then, millionaires and billionaires would not be able to avoid paying taxes.

I, for one, have never been a fan of value-added taxes, having experienced them first-hand in Britain as a supplement to the income tax. Lindsey has a different conception of the value-added tax, portraying it as a substitute for the income tax. He says that the federal government is going to be so strapped for cash in five years that Congress will have to go with the most efficient way of raising revenue, and that is a value-added tax.

What also troubles many advocates of tax reform, including this writer, is that the VAT may be too efficient a revenue engine. Inching it up a notch or two from time to time is temptingly easy for legislators.

And what is to stop Congress from restoring personal and corporate income taxes later, while keeping the VAT? According to Lindsey, if these taxes are eliminated, they would be politically difficult to reinstate. Just as there is political resistance to introducing a new VAT now, so there would be pushback from adding back an income tax once it has been eliminated. If he’s right, perhaps it’s time to give the VAT a second look.

Raising America’s growth rate is vital because over the past five years America has, unfortunately, traded places with Canada and Germany. America’s unemployment rate is higher than theirs, whereas it used to be lower. America’s deficits are bigger. America’s economic growth rate is weaker.

But that could change back in a positive direction. With a new president, America could implement new policies for economic growth. And even Buffett might pay some taxes.

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12 February 2012 5:41 PM

Senator Rick Santorum’s address to an overflow, standing-room only crowd at the annual Conservative Political Action Conference (CPAC) in Washington, D.C. showed the Pennsylvania Republican candidate at his best.

Flanked by his wife and six of their seven children, he made the case for his selection as the Republican who should go up against President Obama in November.

Fresh from his triple win in three Republican presidential contests on Tuesday, and following his Iowa victory last month, this was Santorum’s opportunity to lay out his message to thousands of conservative attendees.

What are Santorum’s economic policies, and would they help Americans?

Presidential candidates don’t need dozens of different economic policies that Congress is unlikely to adopt. Voters won’t read many policies. They mostly want to hear what candidates will do to fix the economy and to put them and their friends and loved ones back to work.

Americans are concerned with the burden of debt they are leaving to future generations. Many young Americans wonder whether Social Security and Medicare will be there for them when they retire.

One of the most carefully-crafted proposals for entitlement reform is by House Budget Committee Chairman Paul Ryan, who spoke at CPAC on Thursday.

Santorum supports Ryan’s plan. For Medicare, it would allow workers who retire in 10 years to choose from a variety of plans, with some part of the premiums paid by the government. Premiums would vary, depending on income and health. Current retirees, and those retiring before 2022, would stay on traditional Medicare.

Santorum wants to balance Social Security by gradually raising the retirement age for younger workers and changing indexing of benefits.

As well as reforming entitlements, Santorum wants to cut non-defense spending to 2008 levels. He would end energy subsidies and other wasteful government programs, cutting $5 trillion over 5 years.

Uncertainty over taxes is hobbling American business decisions and undermining consumer confidence. The complex tax code means that many Americans can no longer calculate their own taxes, and use software programs or accountants.

Santorum wants to simplify the tax code by moving from five to two rates, 10 percent and 28 percent, eliminating many deductions, and expanding the personal exemption for children. This is in contrast to President Obama, who regularly proposes new taxes on different classes of Americans.

In addition, Santorum would abolish the estate tax and the alternative minimum tax (AMT). The AMT, adjusted downwards every year by Congress, is now paid by millions of Americans, particularly those with large families in high-tax states.

Santorum would lower corporate tax rates, at 35 percent now the highest in the world. He would cut the rate to 17.5 percent and allow the cost of all business equipment to be deducted in the year of purchase. Manufacturing would have a zero rate of tax.

One improvement would be to eliminate the corporate tax rate altogether, so that all sectors would be treated equally, ensuring a flow of investment into, rather than out of, the United States.

The new business investment would stimulate job creation, generating additional tax revenues.

One of Santorum’s highest priorities is to repeal the new health care law, and replace it with competition and choice for health insurance, the way people easily purchase auto, home, and life insurance.

Health care is just the tip of the regulatory iceberg in Washington. From transportation to the environment, from energy to education, the current administration cranks out endless rules that stifle both American employers and workers.

That’s one reason why hiring has slowed and Americans have withdrawn from the labor force. The labor force participation rate has declined precipitously over the past three years. It’s now at 63.7 percent, same as May, 1983. America needs a 21st century labor force, not a 1980s labor force.

Santorum understands these problems and is determined to end them. His stance on smaller government and a strong defense, as well as his natural authenticity, resonated profoundly with the CPAC attendees. Primaries and caucuses over the next few weeks will show if he has traction with Republican voters.

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DIANA FURCHTGOTT-ROTH

Diana Furchtgott-Roth, former chief of staff of President George W. Bush's Council of Economic Advisers, is a senior fellow at the Manhattan Institute for Policy Research. From 2003 to 2005 she was chief economist of the U.S. Department of Labor. Ms. Furchtgott-Roth is a contributing editor for RealClearMarkets.com and a columnist for The Examiner and for Tax Notes. She is editor of Overcoming Barriers to Entrepreneurship in the United States and coauthor of Women’s Figures: An Illustrated Guide to the Economics Progress of Women in America. Ms. Furchtgott-Roth received degrees in economics from Swarthmore College and Oxford University.